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G.R. No.

172690 March 3, 2010 HEIRS OF JOSE LIM,


represented by ELENITO LIM, Petitioners, vs. JULIET
VILLA LIM, Respondent.

Facts
In 1980, the heirs of Jose Lim alleged that Jose Lim
entered into a partnership agreement with Jimmy Yu
and Norberto Uy. The three contributed P50,000.00
each and used the funds to purchase a truck to start
their trucking business. A year later however, Jose
Lim died. The eldest son of Jose Lim, Elfledo Lim, took
over the trucking business and under his management,
the trucking business prospered. Elfledo was able to
but real properties in his name. From one truck, he
increased it to 9 trucks, all trucks were in his name
however. He also acquired other motor vehicles in his
name. In 1993, Norberto Uy was killed. In 1995, Elfledo
Lim died of a heart attack. Elfledo’s wife, Juliet Lim,
took over the properties but she intimated to Jimmy
and the heirs of Norberto that she could not go on with
the business. So the properties in the partnership were
divided among them. Now the other heirs of Jose Lim,
represented by Elenito Lim, required Juliet to do an
accounting of all income, profits, and properties from
the estate of Elfledo Lim as they claimed that they are
co-owners thereof. Juliet refused hence they sued her.
The heirs of Jose Lim argued that Elfledo Lim acquired
his properties from the partnership that Jose Lim
formed with Norberto and Jimmy. In court, Jimmy Yu
testified that Jose Lim was the partner and not Elfledo
testified that Jose Lim was the partner and not Elfledo
Lim. The heirs testified that Elfledo was merely the
driver of Jose Lim. 

Issue
Was Elfledo a partner to the trucking business?

Held
YES. ARTICLE 1767 and 1769, NCC. Based on
the evidence presented regardless of Jimmy Yu’s
testimony in court that Jose Lim was the partner. If
Jose Lim was the partner, then the partnership would
have been dissolved upon his death.

A partnership is dissolved upon the death of the


partner. Further, no evidence was presented as to
the articles of partnership or contract of partnership
between Jose, Norberto and Jimmy. Unfortunately,
there is none in this case, because the alleged part‐
nership was never formally organized. But at any rate,
the Supreme Court noted that based on the functions
performed by Elfledo, he is the actual partner.

The following circumstances tend to prove that Elfledo


was himself the partner of Jimmy and Norberto: 1.)
Cresencia testified that Jose gave Elfledo P50,000.00,
as share in the partnership, on a date that coincided
with the payment of the initial capital in the partner‐
ship; 2.) Elfledo ran the affairs of the partnership,
wielding absolute control, power and authority, without
any intervention or opposition whatsoever from any of
petitioners herein; 3.) all of the properties, particularly
any intervention or opposition whatsoever from any of
petitioners herein; 3.) all of the properties, particularly
the nine trucks of the partnership, were registered in
the name of Elfledo; 4.) Jimmy testified that Elfledo
did not receive wages or salaries from the partnership,
indicating that what he actually received were shares
of the profits of the business; and 5.) none of the
heirs of Jose, the alleged partner, demanded periodic
accounting from Elfledo during his lifetime.

As repeatedly stressed in the case of Heirs of Tan Eng


Kee, a demand for periodic accounting is evidence of a
partnership. Furthermore, petitioners failed to adduce
any evidence to show that the real and personal
properties acquired and registered in the names of
Elfledo and Juliet formed part of the estate of Jose,
having been derived from Jose’s alleged partnership
with Jimmy and Norberto. Elfledo was not just a hired
help but one of the partners in the trucking business,
active and visible in the running of its affairs from day
one until this ceased operations upon his demise. The
extent of his control, administration and management
of the partnership and its business, the fact that its
properties were placed in his name, and that he was
not paid salary or other compensation by the partners,
are indicative of the fact that Elfledo was a partner
and a controlling one at that. It is apparent that the
other partners only contributed in the initial capital but
had no say thereafter on how the business was ran.
Evidently it was through Elfredo’s efforts and hard work
that the partnership was able to acquire more trucks
and otherwise prosper.
that the partnership was able to acquire more trucks
and otherwise prosper.

Considering thus the value and nature of petitioner’s


alleged contribution to the purported partnership,
the Court, even if so disposed, cannot plausibly
extend Annex "A-1
"A-1"" the legal effects that petitioner
so desires and pleads to be given. Annex "A-1"
Annex "A-1",, in
fine, cannot support the existence of the partnership
sued upon and sought to be enforced. The legal and
factual milieu of the case calls for this disposition. A
partnership may be constituted in any form, save when
partnership may be constituted in any form, save when
immovable property or real rights are contributed
thereto or when the partnership has a capital of at
least ₱3,000.00, in which case a public instrument
shall be necessary.25 And if only to stress what has
repeatedly been articulated, an inventory to be signed
by the parties and attached to the public instrument
is also indispensable
also indispensable to the validity of
validity of the partnership
whenever immovable property is contributed to it.

As such, the said "Memorandum" … is null and void


for purposes of establishing the existence of a valid
contract of partnership. Indeed, because of the failure
to comply with the essential formalities of a valid
contract, the purported "partnership/joint venture" is
legally inexistent and it produces no effect whatso‐
ever. Necessarily, a void or legally inexistent contract
cannot be the source of any contractual or legal right.
Accordingly, the allegations in the complaint, including
the actionable document attached thereto, clearly
demonstrates that [petitioner] has NO valid contractual
or legal right which could be violated by the [individual
respondents] herein. As
herein. As a consequence, [petitioner’s]
complaint does NOT state a valid cause of action
because NOT all the essential elements of a cause of
action are present. (Underscoring
present. (Underscoring and words in bracket
added.)

FEDERICO JARANTILLA, JR., Petitioner, v. ANTONIETA


JARANTILLA, BUENAVENTURA REMOTIGUE,
substituted by CYNTHIA REMOTIGUE, DOROTEO
JARANTILLA, BUENAVENTURA REMOTIGUE,
substituted by CYNTHIA REMOTIGUE, DOROTEO
JARANTILLA and TOMAS JARANTILLA, Respondents.

Facts
 The spouses Andres Jarantilla and FelisaJaleco were
survived by eight children: Federico Sr., Delfin, Ben‐
jamin, Conchita, Rosita, Pacita, Rafael and Antonieta.
Petitioner Federico Jarantilla, Jr. is the grandchild
of the late Jarantilla spouses by their son Federico
Jarantilla, Sr. and his wife Leda Jamili. Petitioner also
has two other brothers: Doroteo and Tomas Jarantilla.

The Jarantilla heirs extrajudicially partitioned amongst


themselves the real properties of their deceased
parents. With the exception of the real property
adjudicated to PacitaJarantilla, the heirs also agreed
to allot the produce of the said real properties for
the years 1947-1949 for the studies of Rafael and
AntonietaJarantilla.

Sps. Rosita Jarantilla and Vivencio Deocampo entered


into an agreement with the spouses Buenaventura
Remotigue and ConchitaJarantilla to provide mutual
assistance to each other by way of financial support
to any commercial and agricultural activity on a joint
business arrangement. This proved to be successful
as they were able to establish a manufacturing
and trading business, acquire real properties, and
construct buildings, among other things. The same
ended in 1973 upon their voluntary dissolution.
ended in 1973 upon their voluntary dissolution.

The spouses Buenaventura and ConchitaRemotigue


executed a document Acknowledgement of
Participating Capital stating the participating capital
of of their co-owners as of the year 1952, with
AntonietaJarantillas stated as eight thousand pesos
(P8,000.00) and Federico Jarantilla, Jr.s as five
thousand pesos (P5,000.00).

The controversy started when Antonieta filed a


complaint against Buenaventura, Cynthia, Doroteo and
Tomas, for the accounting of the assets and income
of the co-ownership, for its partition and the delivery
of her share corresponding to eight percent (8%), and
for damages. She alleged that the initial contribution of
property and money came from the heirs inheritance,
and her subsequent annual investment of seven
thousand five hundred pesos (P7,500.00) as additional
capital came from the proceeds of her farm.

Respondents denied having formed a partnership.


They did not deny the existence and validity of the
"Acknowledgement of Participating Capital" and in
fact used this as evidence to support their claim that
Antonietas 8% share was limited to the businesses
enumerated therein. Petitioner Federico Jr joined his
aunt Antonieta and likewise asserted his share in the
supposed partnership.

The RTC rendered judgment in favor of Antonieta and


Federico. On appeal, the CA set the RTC Decision.
The RTC rendered judgment in favor of Antonieta and
Federico. On appeal, the CA set the RTC Decision.
Petitioner filed a petition for review to the SC.

Issue
Did the CA err in ruling that petitioners are not
entitled to profits over the businesses not listed in the
Acknowledgement?

Held
There is a co-ownership when an undivided thing or
right belongs to different persons. It is a partnership
when two or more persons bind themselves to
contribute money, property, or industry to a common
fund, with the intention of dividing the profits among
themselves.

The common ownership of property does not itself


create a partnership between the owners, though
they may use it for the purpose of making gains;
and they may, without becoming partners, agree
among themselves as to the management, and use
of such property and the application of the proceeds
therefrom.

Under Article 1767 of the Civil Code, there are two


essential elements in a contract of partnership: (a) an
agreement to contribute money, property or industry
to a common fund; and (b) intent to divide the profits
among the contracting parties.

It is not denied that all the parties in this case have


It is not denied that all the parties in this case have
agreed to contribute capital to a common fund to be
able to later on share its profits. They have admitted
this fact, agreed to its veracity, and even submitted
one common documentary evidence to prove such
partnership - the Acknowledgement of Participating
Capital.

The Acknowledgement of Participating Capital is


a duly notarized document voluntarily executed by
Conchita Jarantilla-Remotigue and Buenaventura
Remotigue in 1957. Petitioner does not dispute its
contents and is actually relying on it to prove his
participation in the partnership. Article 1797 of the
Civil Code provides:

Art. 1797. The losses and profits shall be distributed


in conformity with the agreement. If only the share
of each partner in the profits has been agreed upon,
the share of each in the losses shall be in the same
proportion.

In the absence of stipulation, the share of each partner


in the profits and losses shall be in proportion to what
he may have contributed, but the industrial partner
shall not be liable for the losses.

The petitioner himself claims his share to be 6%,


as stated in the Acknowledgement of Participating
Capital. However, petitioner fails to realize that this
document specifically enumerated the businesses
Capital. However, petitioner fails to realize that this
document specifically enumerated the businesses
covered by the partnership: Manila Athletic Supply,
Remotigue Trading in Iloilo City and Remotigue Trading
in Cotabato City. Since there was a clear agreement
that the capital the partners contributed went to the
three businesses, then there is no reason to deviate
from such agreement and go beyond the stipulations
in the document. Therefore, the Court of Appeals did
not err in limiting petitioners share to the assets of the
businesses enumerated in the Acknowledgement of
Participating Capital.

In Villareal v. Ramirez, the Court held that since a


partnership is a separate juridical entity, the shares to
be paid out to the partners is necessarily limited only
to its total resources.

***

The petitioner further asserts that he is entitled to


respondents properties based on the concept of trust.
He claims that since the subject real properties were
purchased using funds of the partnership, wherein
he has a 6% share, then "law and equity mandates
that he should be considered as a co-owner of those
properties in such proportion."

As a rule, the burden of proving the existence of


a trust is on the party asserting its existence, and
such proof must be clear and satisfactorily show the
existence of the trust and its elements. While implied
such proof must be clear and satisfactorily show the
existence of the trust and its elements. While implied
trusts may be proved by oral evidence, the evidence
must be trustworthy and received by the courts with
extreme caution, and should not be made to rest on
loose, equivocal or indefinite declarations. Trustworthy
evidence is required because oral evidence can easily
be fabricated.

The petitioner has failed to prove that there exists


a trust over the subject real properties. Aside from
his bare allegations, he has failed to show that the
respondents used the partnerships money to purchase
the said properties. Even assuming arguendo that
some partnership income was used to acquire these
properties, the petitioner should have successfully
shown that these funds came from his share in the
partnership profits. After all, by his own admission, and
as stated in the Acknowledgement of Participating
Capital, he owned a mere 6% equity in the partnership.

TOCAO v CA, ANAY

Facts
Private respondent Nenita A. Anay met petitioner
William T. Belo, then the vice-president for operations
of Ultra Clean Water Purifier, through her former
employer in Bangkok. Belo introduced Anay to
petitioner Marjorie Tocao, who conveyed her desire to
enter into a joint venture with her for the importation
and local distribution of kitchen cookwares.
and local distribution of kitchen cookwares.

Under the joint venture, Belo acted as capitalist, Tocao


as president and general manager, and Anay as head
of the marketing department and later, vice-president
for sales

The parties agreed that Belo's name should not


appear in any documents relating to their transactions
with West Bend Company. Anay having secured the
distributorship of cookware products from the West
Bend Company and organized the administrative
staff and the sales force, the cookware business took
off successfully. They operated under the name of
Geminesse Enterprise, a sole proprietorship registered
in Marjorie Tocao's name.

The parties agreed further that Anay would be entitled


to: 
(1) ten percent (10%) of the annual net profits of the
business; 
(2) overriding commission of six percent (6%) of the
overall weekly production; 
(3) thirty percent (30%) of the sales she would make;
and 
(4) two percent (2%) for her demonstration services.
The agreement was not reduced to writing on the
strength of Belo's assurances that he was sincere,
dependable and honest when it came to financial
commitments. 

On October 9, 1987, Anay learned that Marjorie Tocao


On October 9, 1987, Anay learned that Marjorie Tocao
had signed a letter addressed to the Cubao sales
office to the effect that she was no longer the vice-
president of Geminesse Enterprise.

Anay attempted to contact Belo. She wrote him twice


to demand her overriding commission for the period of
January 8, 1988 to February 5, 1988 and the audit of
the company to determine her share in the net profits.

Anay still received her five percent (5%) overriding


commission up to December 1987. The following
year, 1988, she did not receive the same commission
although the company netted a gross sales of P
13,300,360.00.

Issue
WON a partnership was formed

Held
Yes, the parties involved in this case formed a
partnership.

The Supreme Court held that to be considered a


juridical personality, a partnership must fulfill these
requisites:

(1) two or more persons bind themselves to contribute


money, property or industry to a common fund; and

(2) intention on the part of the partners to divide the


(2) intention on the part of the partners to divide the
profits among themselves. It may be constituted in
any form; a public instrument is necessary only where
immovable property or real rights are contributed
thereto. 

This implies that since a contract of partnership is


consensual, an oral contract of partnership is as good
as a written one.

In the case at hand, Belo acted as capitalist while


Tocao as president and general manager, and Anay
as head of the marketing department and later, vice-
president for sales. Furthermore, Anay was entitled to
a percentage of the net profits of the business.

Therefore, the parties formed a partnership.

PAUL MCDONALD v NATIONAL CITY BANK OF NEW


YORK CITY

Stasikinocey is a partnership doing business in San


Juan, Rizal, and formed by Alan W. Gorcey, Louis F. da
Costa, Jr., William Kusik and Emma Badong Gavino.
The partnership was denied registration in the Securit‐
ies and Exchange Commission, and while it is confus‐
ing to see in this case that the Cardinal Rattan, some‐
times called the Cardinal Rattan Factory, is treated as
a co-partnership, of which Defendants Gorcey and da
Costa are considered general partners.
Costa are considered general partners.

Defendant Stasikinocey had an overdraft account with


The National City Bank of New York, a foreign banking
association duly licensed to do business in the Phil‐
ippines. On June 3, 1949, the overdraft showed a bal‐
ance of P6,134.92 against the Defendant Stasikinocey
or the Cardinal Rattan, which account, due to the
failure of the partnership to make the required
payment, was converted into an ordinary loan for
which the corresponding promissory ‘joint note non-
negotiable’ was executed on June 3, 1949, by Louis F.
da Costa for and in the name of the Cardinal Rattan,
Louis F. da Costa and Alan Gorcey. This promissory
note was secured on June 7, 1949, by a chattel
mortgage executed by Louis F. da Costa, Jr., General
Partner for and in the name of Stasikinocey, alleged
to be a duly registered Philippine partnership, doing
business under the name and style of Cardinal Rattan,
with principal office at 69 Riverside, San Juan, Rizal.

During the subsistence of the loan, the vehicles were


sold to MacDonald and later on, MacDonald sold 2 of
the 3 vehicles to Gonzales. The bank brought an action
for recovery of its credit and foreclosure of the chattel
mortgage upon learning of these transactions.

Issue
WON the partnership, Stasikinocey is estopped from
asserting that it does not have juridical personality
since it is an unregistered commercial partnership.
since it is an unregistered commercial partnership.

Held
YES. In ruling that an unregistered commercial
partnership which has no independent juridical
personality can have a domicile so that a chattel
mortgage registered in that domicile would bind third
persons who are innocent purchasers for value.

Da Costa and Gorcey cannot deny that they are


partners of the partnership Stasikinocey, because in
all their transactions with the National City Bank they
represented themselves as such. McDonald cannot
disclaim knowledge of the partnership Stasikinocey
because he dealt with said entity in purchasing two of
the vehicles in question through Gorcey and Da Costa.
The sale of the vehicles to MacDonald being void, the
sale to Gonzales is also void since a buyer cannot have
a better right than the seller.

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